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BUSINESS REVIEW Vo l. 61. No. 4 March. March. 2014

How to Balance the Intellectual Property Conflic t: a Case Study of J apanese Pharmaceutical Companies in Emerging Countries

YuJn-r-mw XMum 一明 MPν νゎ J'ιY

Abstract Abstract

Pharmaceutical companies entering emerging countries wiU face intellectual property property conflicts due to issues relating to thc access to medicines of consumcrs in those countnes. “Intellectual property conflic t" refers to the conflict of intercst which exists between manufacturers ，who own intellectual property ， and consumers ，who do no t.

In In reviewing the representative literature ， there is a focus on the pricing patterns (known as differential pricing) of pharmaceuticals. This is a way of setting different prices for the the same products in different areas or countries ， in particular setting a low price for low- income income consumers. while at the same time maintaining the pharmaceutical companies' profits by granting patents.

In In spite of the growing literature on differential pricing ， research in the field of corporate corporate behavior reviewed has been relatively lcss dctailed. This paper explores the issue issue from a corporate perspective ， by examining four R&D-driven PCs in J apan: Takeda

Pharmaceutical Pharmaceutical Company Limited (Takeda) ， Daiichi Sankyo Company Limited (Daiichi

Sankyo) ， Co. ，L TD (E isai) and Inc. (Astellas) ， mainly through the use of of quantitative data as a means to determine key financial indicators during the period 20 ∞- 2013 2013 reviewed 172 172 一一- BUSINESS REVIEW -一一

Keywords: Intellectual Property (IP) ，Intellectual Property Conflict (IP Conflict) ，Paten t，

Pharmaceutical Pharmaceutical Companies (PCs) ，Emerging Countries ， Access to Medicines

1. 1. Introduction

As pharmaceutical markets in developed countries ， induding ，America and

Europe mature ，attention has tumed to ・pharmerging markets'.l Pharmaceutical companies

(hereafter ， PCs) have carried out their business in the markets of developed countries ， mainly in in Japan ，America and Europe during the past decades. However ， because of the falling birthrate birthrate and depopulation ，and rising medical expenses ， the govemments in developed countries countries took action to curb medical expenses. especially through promoting generic drugs.

In In addition ，many PCs lost their revenues in developed countries because of the impact of of top-selling products losing their patent protection. At the same time ， the markets in emerging countries (巴 merging markets) were growing. The emerging market will reach 28 percent percent of global spending by 2016 ，compared with 4.8 percent in 2004 ， as population and economic growth contribute to a dramatically higher use of medicines in these markets.

Moreover ， the CAGR of pharmaceuticals markets during the period 2013-2017 is expected to ・. be 14-17 percent in emerging countries ，compared to 3-5 percent in developed countries. 2 In shor t， this tendency indicates that the contribution of revenues from developed markets is much less than from emerging markets ，and emerging markets have become more attractive to to PCs.

On the other hand ，PCs which are entering emerging countries will face serious problems ， such as intellectual property confiicts due to access to medicines and govemment regulation regulation related to 出IS. ‘Access to medicines' means the problem of low-income consumers who cannot afford the drug prices for their treatmen t. The main issue surrounding access to to medicines is high drug prices. However ，why is it that the same pricing does not cause problems of access to medicines in developed markets? One reason for this may be the

The phrase ・pharmerging marke t' stands for pharm( 即日utica l) +(em)erging. That is ，emerging markets targeted targeted by pharmaceutical compan 児 s. Generally ， the pharmaceutical mark 巴ts in emerging countries are seen as as pharmerging markets ，like China ，Russia ，Brazil and India 2 Source: IMS Health httD:/ httD:/ /www .i mshealth.com/deDlovedfiles/ims/GloballContent/lns I! lhts/Medicines Outlook Through 2016 Report.pdf Report.pdf (Accessed on 5 Dec. 2013) How How to Balance the Intellectual Property Confiict a Case Study 01 )apanese Pharmaceutical Companies in Emergmg Countries 一一一 173 fact fact that medical insurance systems in emerging countries have not been fully developed

Because of these deficient medical In surance systems. copayment for consumers in emerging countries countries will be higher than that for consumers in developed countries. 、Moreover. some consumers in some emerging countries have to pay the full cost of medicines. In spite of rapid rapid economic growth in emerging countries. among the population there remains a large proportion proportion of low-income households I (for instance. the proportion of low-income households in in China accounted for 49 .4 percent of total population in 2010' ). The amount of copayment will will become a burden for low-income citizens. thus causing the issue of access to medicines. To solve this issue. governments in emerging markets have introduced some policies. policies. such as the issuing of compulsory licensing to manufacture products (usually called generic generic products). which are provided at a low price to consumers. Compulsory licensing is is a form of authorization. whereby governments allow someone else to produce patented

products products or processes without the consent of thc patent owner under the TRIPS (Trade 甲 Rc!ated Rc!ated Aspects of Intellectua! Property Rights) Agreemen t. Compu!sory !icensing will not benefit benefit PCs. because they earn less than in the situation before the issuing of compu!sory !icensing. !icensing. Under the scheme of compu!sory licensing. PCs only earn a profit of 0.5% of sales. based on the pricing of the gencric products (Tsuruhara. 2007. p.43.)" In In these circumstances. what path will companies take? It seems tha t. for PCs who want to run their business smoothly in emerging markets. it will depend on whether they they address the issue of access to medicines vo!untarily. thereby eliminating the potential for for compu!sory licensing; that is. whether they offer medicines at a low price voluntarily. However. as pharmaceutica!s require huge R&D costs. it seems tha t. by setting low prices. it would be difficult to recover costs and repay investors How much cost is invested in deve!oping a new type of medicine? It takes an enormous amount of time and money to develop one new drug. It takes an average of 10- 15 15 years to develop a new medicine. from the earliest stages of discovery to the time it is

γhe average copayment for consumers in developed countries is 7-13 percen t. compared with 50 ・100 percent percent m emergmg countnes

I According to White Paper on International Economy and Trade (2010). low-income household refers to annual annual disposal income of less than US $5.000 Source: Source: Websitc of Ministry of Economy. Trade and Industry. http://www.met i. go.jp/report/ tsuhaku2011/2011honbun_p/201 tsuhaku2011/2011honbun_p/201 L03- l. pdf(Accessed on December 1ぺ2013) " ror more examples of compulsory licensing please sec thc Website 01 the ]apanese Patent 0 世ice: httD:! httD:! /WWW.iDO.go.i ロノ shirvou/toushin/chousa/odfltrioschousahoukoku I2 4 1.odf 174 174 一一一 BUSINESS REVIEW- 一一 available available for treating patients. The average cost is estimated to be $800 million to $1 billion.'

Even though pharmaceutic aJ s require huge R&D costs. PCs have to consider the background to to people's needs or the introduction of low-priced drugs to solve the issue of access to medicines medicines (the relationship between access to medicines and IP will be described later) if they they want to enter the emerging markets.

Therefore ，this paper considers some schemes that might be able to balance the

IP IP confiict due to problems of access to medicines ， using a case study from the companies' perspective. perspective. 'Schemes for balancing IP co 凶 icts' means considering how PCs could benefit under under the conditions of low pricing ， in order to solve the problem of access to medicines due to to IP confiicts.

The paper is structured as follows: Section 2 provides a definition of “intellectu aJ property" property" (IP) ，and describes what IP conflicts are (the relationship between access to medicines medicines and IP). Section 3 reviews and analyzes the theoretic aJ literature about IP confiicts. Section Section 4 discusses a methodology to interpret the data available. Section 5 presents some

empirical empirical findings regarding studies of pharmaceutical manufacturers 目 Section 6 provides some tentative conclusions.

2. 2. Concepts of intellectual prope 吋y and intellectual prope 同y conflict

2.1 2.1 The concept of intellectual property

The World Intellectual Property Organization (WIPO) detines “intellectual property"

(I P) as creations of the mind ，including inventions ，literary and artistic works ， and symbols ， names ，images ，and designs used in commerce. It is a wide ranging definition. In practice ， the the definition of IP may be limited and varies according to different research outcomes and viewpoints. viewpoints. For instance ，Ghaur i. Pervez N. ， and Rao ， P. M. (2009) refers to IP as technology- based based intangible assets ，from the perspective of the IT industry.

For the purposes of this paper ， the term "intellectual property" (IP) refers to a valued valued part of a creation of the mind ，which would be able to generate profit for the given company. company. It divides into two types: one is protected by IPRs (intellectual property rights) ， such such as patents ，copyrigh t. and so on; the other is not protected by IP R， such as ideas or

urce: So urce: Website of PhRMA htto:/ htto:/ /www.ohrma.orll/sites/defaul t! files/.../rd brochure 022307.od t (Accessed on September 19'1'.2013) 一一一 How to Balance 版In tellecrual Property ConfiicL a Case Study of Japanese Pharmaceutical Co mpanies in Emerging Countries 一一一 175 designs designs for a new produc t. In business managemen t. IPs are interpreted as a kind of business resource resource (l ike a factory) ， that is a tool to generate profi t. On the other hand ， there are some

IPs IPs which are unable to generate profit for a company ， but which require maintenance costs ， and they are seen as negative assets. Therefore ， they cannot be considered as IPs here.

How does IP generate profit for a company? One sort of IP ，which is not protected by IP R， like ideas ， are sales resources. This could make a difference with other competitors and such differences could create opportunities ，if chosen by consumers ，which then lead to increased increased sales. Another sort of IP ，which is protected by IP R， such as a patent ， has exclusive rights rights and will bar price competition as a resu 1t of competition with other rivals: therefore it is is a tool to secure profit (Do i. 2008: 893).

2 ，2 The relationship between Intellectual Property and access to medicines

The relationship between Intellectual Property and access to medicines ，known here as as the “Intellectual Property confiict ・" refers to the confiict of interest which exists between manufacturers ，who own intellectual property ，and consumers ，who do no t. In this paper ，'the interest interest of manufacturers' refers to sales ，profi t. or revenue: and ・the interest of consumers' means access to medicine 邑 for treatment As described above. the issue of intellectual property conflict relates to high drug prices. Previous studies ， as in Cottingham ， ].， and Berger ，M. (2011) ， claim that high drug prices always resulted from patents owned by PCs. On the other hand ， because of the the characteristic of intellectual property that it is intangible and easily imitated ，a patent system is needed ，Generally ，PCs apply for a patent to protect the knowledge they generate ， a process which often gives them a monopolistic control over new drugs for a set period of time. time. Because the technology is easy to imitate ，PCs will lose market share and profit once the the technology is copied by other competitors (the results are similar to a patent expiring). In this this way ， PCs will lose opportunities to recover costs. and incentives for future research will diminish. diminish.

To many ，it may seem that the advent of the drug (or patented drug) has simply widened the gap between developed and emerging markets. Furthermore. even though patents patents may in theory cnable a firm to charge a high price. this may not be in a firm's self- interest interest in markets where the consumers cannot afford to pay (Danzon. P. i¥ l.，巴 ta 1. 2003) For this reason. the issue of access to medicines relative to patented intellectual property is 176 176 一一- BUSINESS REVIEW- 一一

called called the intellectual property confiict

3. 3. Li terature Review-Differential pricing

Representative Representative studies focus on ‘differential pricing' (also known as tiered pricing ， or

price price discrimination) ， which sets different prices for the same products in different areas or

countries; countries; that is to say that a high price is set in high-income countries ， and a low price is

set set in low-income countries (Danzon ， P. M ， et al.， 2003; Fra 叫c， R. し 2011) ， based on the price elasticity elasticity of demand Danzon ，P. M. et al. (2003) ，Frank R. L. (2011) ， and Mazummdar ，M， and Banerjee ， D.

S. S. (2012) ，consider that differential pricing is a bilateral way to balance IP confiicts between

PCs and consumers. This is because differential pricing ，especially setting a low price ， could

provide provide low-income consumers with easy access to medicines. At the same time ，PCs could benefit benefit more from differential pricing than from uniform pricing (Frank ， R. 1.， 2011 ，p .l 540) by taking advantage of the elasticity of demand. Given the sensitivity of consumers' demand

for for a product to changes in price ，generally speaking low-income consumers will have more

elastic elastic demand ，meaning that if the price decreases ， their consumption will increase (the market is expanded) (Fran k， R. L.， 2011 ，p .l 539). The consequent increase in consumption will lead lead to increased sales.

On the other hand ， the PCs' problem is their high R&D expenses ，叩d they also have to to add in production costs (such as materials costs) due to the expanding scale of production

as as consumption rises. Under these conditions of high cost and low prices ，how could PCs

benefit? benefit? Regarding this question ，Danzon ， P. M et a1. (2003) describe the concept of pricing

standards; standards; that is ， a set price under or near the marginal cos t. whilst Frank ， R. 1. (2011) proposes proposes an approach by reducing fixed costs

Although Although there is a growing amount of literature on differential pricing ，Moon ，S.

et et al. (2011) 叩 d Lopert ， R. et al. (2002) rejected this idea as it has two shortcomings: a small

market scale and a requirement for a low-cost production capability. To be effective ，pricing by elasticity of demand is dependent on a large-scale marke t. but if the market scale is

small ，an increase in sales cannot be expected. Furthermore ，if PCs do not have a low-cost production production capability to manage increasing production costs caused by a larger market size ，

differential differential pricing can only work out in the short term ， but it is di 血cult to continue with this 一一日 ow to Balance the Intellectual Property Confiic t: aCase Study 01 ]apanese Pharmaceutical Comp 加 ies in Emerging Countries -- 177

in in the long ter m.

4. 4. Methodology

In In spite of the growing amount of literature focusing on differential pricing ，a

theoretical theoretical approach which is limited ， research in the field of corporate behavior on how to to balance the IP conflict has been relatively less detailed. This paper explores the issue from the perspective of the company by examining four leading PCs in J apan: Takeda Pharmaceutical Pharmaceutical Company Limited (Takeda). Daiichi Sankyo Company Limited (Daiichi

Sankyo) ，Eisai Co. ，LTD (Eisai) and Astellas Pharma lnc. (Astellas) ， mainly through the use of quantitative quantitative data as a means of determining key 日nancial indicators during the period 2000- 2013 2013 reviewed. Although the four firms are considered to be rather similar with regard to

their their reasons for entering the markets of emerging countries (that is ， to recover their lost

revenues revenues in developed countries) ，essentially the way that they have entered these markets

reveals reveals unique differences when one analyzes certain key elements ， such as their strategies

to to enter developing countries. Takeda and Daiichi Sankyo acquired a generic manufacturer ，

Eisai Eisai built a factory in the emerging countries ，and Astellas introduced regional strategies ，

including including a strengthened sales networ k. The objective of the four firms was similar ， that is to

reduce reduce production costs to supply lower priced drugs ， although their practices are different

As indicated ，much reliance is placed on quantitative data and the next section of

this this paper provides a quantitative examination of Takeda ，Daiichi Sankyo ，Eisai and Astellas

in in terms of their respective corporate investments and financial performance from 2000-2013 目

5. 5. Some empirical findings

The four companies are leading R&D-driven pharmaceutical companies in ]apan. although although sales their volumes are differen t. The major markets of the four companies are

Japanese ，European and American. The net sales ， net incomes ，ROE and share price of each company have decreased due to the impact of top-selling products losing patent protection in in the American marke t. which is a major market of the four companies (see Table 1). For

example. example. the key financial indicators of Takeda ，whose patent protection for its top-selling produc t. T AKEPRON. expired in Nov. 2009. have decreased rapidly since March 2011 (the 178 178 一一一 BUSINESS REVIEW - tiscal tiscal year of the ]apanese company ends on Mar 31) ， as seen in Table 2. This is one of the reasons reasons that the four companies entered the emerging countries' marke t. The four companies have been expanding their businesses in emerging countries since since 2008 by acquiring generic manufacturers ， building factories and introducing regional strategies strategies in the emerging countries. The resultant tinancial performance of each company is

児島cted in Table 2， Table 3， Table 4 and Table 5. Takeda has rapidly increased its sales in emerging countries through the acquisition of of generic manufacturers. Takeda acquired Nycomed International Management GmbH (Nycomed) in 2011 and Multilab Industria e Comercio de Produtos Farmaceuticos Ltda

(Multilab) (Multilab) in 2012 ， both of which have a strong business base in the emerging countries ， including including market share and a sales network. Sales have increased ，however revenues have decreased because of increasing operating expenses. particularly increasing sales administrative administrative expenses (see Figure 1). Takeda has acquired generic manufacturers ，meaning that that personnel cxpenses have also increased. due to an increase in the number of sta 任

Daiichi Daiichi Sankyo ，d who acquired Limited (Ranbaxy) ，a generic manufacture r. has rapidly increased its sales in emerging countries. Ranbaxy has a large market share and a strong sales network in the emerging countries. Actua l¥ y ，sales results in the the emerging countries were almost achieved by Ranbaxy alone

The financial results of Daiichi Sankyo are similar to Takeda; that is ， despite increaSIng 己ale 己， the revenues have decrea 邑ed due 1. 0 an increase in operating expenses. especia l¥ y increased administrative expenses. 1n addition ， Daiichi Sankyo transferred an al¥ owance to cover the confiict between Ranbaxy and the US Food and Drug Administration

(FDA) in 2012 ，and they achieved agreement in May ， 2013. Daiichi Sankyo spent 事38.8bi l¥ ion

to to deal with this conflict 目 Nevertheless ， the conflict arose again when the FDA issued an import alert against drugs produced at Ranbaxy's newest facility in Mohal i. India ， in

September ， 2013. This case affected the tinancial performance of Daiichi Sankyo ，and as a result result their revenues wiU decrease in 2014 9

ド Daiichi Sankyo was cstablished in 2005 through thc mcrgcr of Sankyo Company. Limited and Daiichi Pharmaceutical Pharmaceutical Company. Limited. Thus. the data of 2以)0 -2α)5 in Table 3 and Figur 巴 2 ar 巴 simple additions of the the figures for Daiichi and Sankyo Daiichi Daiichi Sankyo has to manufacture products (inclllding gcneric versions of a Pfizer Inc. cholesterol lowering lowering drug and Eisai Co. Alzheimer's drug) in the U.S. plants as its low-cost Indian plants are banned by the the FDA. Drug manufacturing costs in India are said to be about half of those in developed countries. thlls increasing increasing costs will affect their revenues 一一一 How to Balance 白In tellectual Property Co nfuc t: aCase Study 01 Japanese Pharmaceutical Co 抑制白 in Emerging Co untries -一一 179

Eisai Eisai built a factory in 1ndia in 2009. Eisai supplies generic drugs and lower priced drugs drugs from this plant. and it has also strengthened its sales network.

Regarding the company's financial performance ， as shown in Table 4， sales in developed developed markets started to decrease from 201 1. and this was related to the impact of its leading leading products losing their patent protection. At the same time ， the sales in emerging countries countries have increased ，little by little. Consequently ， in spite of overall decreasing sales ， Eisai Eisai secured its profit through reduced operating expenses (Figure 3).

The activities of Astellas lll are different from the other three companies. In addition to to implementing ways to reduce costs ， Astellas has executed certain regional strategies ， including including introducing drugs which meet the needs of consumers in emerging countries and strengthening strengthening sales their network to sell patented drugs. The strategy is vital for Astellas to be be trusted and chosen by its customers. through enhancing customer satisfaction based on strengthening strengthening the sales networ k. Astellas has implemented this method of strengthening its sales sales network. not only in developed markets but also in emerging markets

Table 5 shows that Astellas is recovering from a fall in sales ，which was due to the the impact of leading products having lost their patent protection in developed markets the earliest earliest among the fourωmpanies. The reason for this trend may be due to the efficacy of strengthening strengthening the sales networ k. In the case of pharmaceuticals ，sales targets arc pharmacies and hospitals (doctors). If pharmacies and hospitals make out prescriptions for the PCs' products products then the PCs' sales and profits will increase even though the products might have lost lost their patent protection. Consequently. Astellas is maintaining its net income as well as net net sales as it suppresses its trading expenses effectively (as shown in Figure 4). The data from the four companies reveals three facts: The companies have achieved the objective of supplying low-priced drugs by reducing reducing costs in order to secure their profi t. especially by reducing sales administrative expenses. expenses. Is this method of reducing sales administrative expenses enough for improving profit? profit? This is not likely. It seems that reducing R&D costs ，which account for a large proportion proportion of trading expenses. may also be needed. Of course. R&D is seen as the driving force force that leads to sus

'" '" Astellas was formed on 1 April 2005 from the merger of Yamanouchi Pharmaceutical Co 。し td. and Fujisawa Fujisawa Pharmaccutical Co.. Ltd. Therefore. the data of 2000-2005 in Table 5 and Figurc 4 are simple additions additions of figures for Yamanouchi and Fujisawa 180 180 一一一 BUSINESS REVIEW -一一 core technology and outsourcing other research ，more costs can be reduced while maintaining maintaining sustainability. In fac t. Pfizer works in this way to reduce R&D costs. As a resul t.

Pfizer Pfizer has reduced their R&D costs from $9 ， 074 million in 2011 to $7 ， 870 million in 2012. 11

Secondly ，Takeda and Daiichi Sankyo lost revenues despite increasing sales. The financial financial results of Takada and Daiichi Sankyo showed that the cost of lower priced drugs is not not offset by the resultant increase in sales volumes (Grover ， A. et a l. 2012). This fact argues against against differential pricing based on price elasticity of demand. The cost of lower pricing means the cost of intr 吋 ucing low pricing. In this paper. it refers to the cost of acquiring a generic generic manufacturer. including increasing personnel expenses and paying settlements to the

FD A. Nevertheless ，it is di 伍cult to say that Takeda and Daiichi Sankyo failed in the short- term. term. as the approach of considering consumer needs (l ow-priced drugs) will determine the PCs' PCs' long-term success. Therefore a long-term perspective is necessary in order to judge the activities activities of the four companies

Thirdly ， the case of Daiichi Sankyo ， (the battie between Ranbaxy and the FDA) ， reveals reveals that working with a cross-division management system is ftawed. The fact is that this is is not only the case for Daiichi Sankyo ， but also for Takeda 12 and most ]apanese companies.

The issue for these companies ，which lack some technologies and knowledge after acquiring foreign foreign companies. is that they try to keep the introduction of foreign managers with a considerable ， broad business experience to a minimum ，and this has become a vital question.

Regarding this question ，it might be necessary for ] apanese companies to learn from the way that Takeda is reforming its corporate governance system. 13 However ， as corporate governance governance systems are not within the scope of this paper. and furthermore it is a big issue needing needing more research. 1 would prefer to have another opportunity to discuss it.

6. 6. Conclusion and further study

In In reviewing representative literature that focuses on the differential pricing of

11 11 Pfizer Inc.. 2012 ，Annual report 1， Mr. Hasegawa. president and CEO of T 汰 eda ，said that 'we failed in the management of foreign subsidiary companies companies (Nycomed and Mutilab) because of the lack of a manager who had broad business experience' ，in an an interview with Nihon Keizai Shimbun. on December 1st. 201:3

J:l J:l Source: Website of Takeda Pharmaceutical Company Limited httD:/ httD:/ /www .t akeda.co.iD/news/2013/20131130 60 77. html (Accessed on D 氏 ember 1¥2013 ) 一一- Ho w to Balance the Intellectual Property Conflict aCase Stud y0 1]apanese Pharmaceutic a1 Companies in Emerging Co untries - 一一 181

pharmaceut icals ，we have considered the approach of setting low prices for low-income

consumers wh i! e securing the profit of a PC ， as a way of balancing the IP conflict due to

access access to medicines . This has received widespread support from industry ，society ，and

academics . Nevertheless ， the practice of 'differential pricing' as part of corporate behavior has has been relatively less deta i! ed

This This paper has explored the issue from a corporate perspective ，by examining four R&D-driven PCs in J apan. The paper has examined the activities of four companies based

on their annual reports ，and discusses the results of this case study . The data from the four companies reveals that they ba l ance the intellectual property issue by supplying low-priced

drugs ; how ever ， they do not mention the rea l pricing standards they used. Regarding pricing

standards ，1 plan to carry out some interviews to a nalyze this as part of future research . The limitation of this research is that the four companies run their businesses in

di 妊erent regions ， although in the same segment of emerging countries .

Table 1: Patent Expiration and Dec r easing Sales (i n billions of Yen )

吋句滋韮 m で望ま ["争当主主 ぷ泌ぬ 腰掛蘇議~翠予感芯 応旬@削除秘樟 検易ラ 蜘糊出醐a 色d ぷ義援 脱漏 以押 経持 lm 干?j TAU ，. RON 加叫..Ic .t 申..> H・06 .20日. 82 .8 94.3 114 .2 市33 . 2 ". 160 159 .9 150 .1 "自 7 27 1.4 2 18 .1 133 .6 122 .1 11 0.2

T 白 keda I Ct y四 2-d cM T掴申..> 帥固.. .2011 8 69 .5 120 .4 1 55 .3 117 .0 19 3 243.8 33 ・3 390 .2 387 384 .7 307 .9 "唖 Z 122 .9 Bl OPRESS (MI Ih yp ・"・...・...... ) 占，.・ 2012 23. 5 ‘8.3 77 .4 105 .5 144 .3 152 .4 1 90 .9 20 ・2 223 .1 230 .3 222 "8 2 18.3 169 .8 ，ROQRAf ，;・・.."....pp' ・..ー 叫drud 晶匝 200 ・ 41 圃 50 .・ 72 .4 89 .1 104 ，4 122 日 '045 .9 11 5.4 2回 20 > >.・ ふV 16 2. 6 15 4.8 161 ，7 |細川… 助制 67 .3 13 .6 96 .9 110 .4 122 .3 137.0 122 .4 113.8 10' 10' "..11". "，四 e凶 Ocl .20 帥 IS5 .9 127 116 .6 6d .S "及。 8・ CRAvrr 包，. nlh ・. .聞.ibac l町凶曲..d I 0・c: .2010 ー | ー I 47 .4 I 41，1 I 50 .2 I ..唖 7 I "' .4 I 43 I 87 .2 I 岡市 I 52 .4 I 35 .9

ARDEPT ..2由10 朗自 (A tlh. l，・.' .・・・."・ ...11 軸・ 57 ・ 7 1.1 95 .8 IT1 5.3 IH 1. 0 l'唖2.8 I196 .5 I252 .9 I官 制 13 1922 .. 1担 0，3 I1-41 1 .1 I84 .3 E聡.， "帆覧す ....胴酬・，..晶 ICor) ...， .2013 18 .4 g・7 8.8 I 117 .4 I 1四 I132 .3 I1 54 .5 I174 .3 I175 .9 I1 59 .9 I 1柑 I136 .9 I12 ・.1 ，岨 4 Note: Note: The figures express the sales of target products whose patent has expired. Source: Source: Annual Report of the companies mentioned above. 182 182 一一一 BUSINESS REVIEW -一一

Table Table 2: Key Financial indicators of Takeda (in (in billions of Yen ，for the year ended March 31)

It ems 20 ∞ 2001 2002 20 国 2004 卸価 20 個 2007 20 伺 20 個 201 。 2011 2012 2013 s. 回 In 由咽畑田d 892.4 892.4 929.3 8 目5.4 1028.3 1103.6 1191.2 1280.2 1347.6 1511.4 1437.6 13 77. 7 1394.6 134 1.7 markats 10 ・7.8 881s 宮 In emar a: lna 30.7 30.7 19.7 17.8 18.6 19.4 21 25 27.2 27 28.4 4 1.7 114.3 215.6 ""・ rkets s‘2 Ng.岨抱 s 923.1 963.5 1005.1 1046.1 1086.4 1123 1212.2 1305.2 1374.8 1538.4 1466 1419.4 1508.9 1557.3 o 問団tln a: ex 田岡田 75 1.1 737.4 723.9 735.4 714.8 737.7 自国4 846.7 951.7 1231.9 1045.8 1052.3 1238.6 1434.8

Tr 司dln a: sur 同岨 17 1. 4 226.1 28 1. 2 310.7 37 1. 6 385.3 4開 8 458.5 423.1 306.5 420.2 367.1 270.3 122.5 Ne t Inoo" 岡田 119.6 140 ・ 235.7 27 1. 8 205.2 277. 4 313.2 335.8 355.5 234.4 297.7 247.9 124.2 13 1.2 R 邑D 回国間輔 77. 3 89.8 100.3 124.2 129.7 14 1. 4 169.6 193.3 275.8 453 296.4 288.9 281.9 324.3

8aslo 自由rnlna 田 r 135.55 135.55 16639 267 .Q2 307.63 32 1. 86 311.01 353 386 418.97 289.82 377. 19 314.01 157.29 233.78 回 mmon sha 間〈四n) Dlvldend 宮田岡田r 32 50 60 65 77 88 1情。。 128 168 180 180 180 180 180 国 mrnon sha 聞 ROE( ‘〉 12.5 132 179 18.2 170 147 14.4 14.1 15.1 10.9 14.4 11 日 6.1 6.3 Sha 帽阿国〈四同 7.3 四3 6.050 5.2 20 4，430 4.640 5.110 6.710 7.730 4.990 3.400 4，115 3.880 3.642 5.030

Note: Note: The segment of developed includes countries ]apan ， North America ，France ，

Italy ，England and Ireland. The segment of developing countries includes

China ，Russia/CIS ，Brazi l， Turkey ， Latin America and Indonesia.

Source: Source: Takeda ，2000-2013 ，Annual Repor t.

Table Table 3: Key Financial indicators of Daiichi Sankyo (in (in billions of Yen ， for the year ended March 31)

It err 帽 20 田 2001 2002 20 田 004 20 慣 2.0 国 2007 問団 20 明 2010 2011 2012 2013 S. 抱 .In 由四胸囲d 873.6 873.6 8454 862 870.9 8981 目92.4 839.9 798 841 2 768 734.4 771.5 阿閣内B'. Sa 抱 s In err 帽 retn a: 166 16.8 19.7 21 21 23.9 26.2 30.5 40.2 44.2 11 0.9 199.4 204.3 226.3 markels N.t 田畑s 890.2 862.2 88 1.1 89 1. 9 919.1 916 ・ 925.9 929.5 880.1 842.1 952.1 967.4 938.7 997.8 。開 ratlng 制問n醐揖 686.5 7106 7495 746.7 770.9 7754 771.2 793.2 723.3 753.2 日56.6 845.3 840.5 897.3

Tradlng 属 urDlus 安03.7 1516 133 宏 145.2 148.2 141 154.7 1363 156.8 88.9 955 122.1 98.2 100.5 Net Inoome 66.9 71 70.2 47.4 70.1 85.5 87.7 78.6 97.7 6 引 5.5 41. 9 70.1 10.4 66.6 R& 日制問n... 98.6 11 0.7 127.7 140.1 145.7 144 158.7 170.7 163.5 184.5 196.8 194.3 185.1 183.0

Bcoamslmc Bcoamslmc oen arsnhinag 問 pEVgBr n〉 119.49 107.75 135.35 6304.22 5945 99.62 14.75 94.64

Olv 回目 nd 雷同岡田r 25 60 70 80 60 60 60 60 E ロmmon sha 聞〈咽n) ROE(S) 7.3 6.3 7.8 620.5 4.9 8.2 1. 3 7.9 Sha 聞岡田(yan) 2.685 3.610 2.945 1.648 1.751 1.606 1.508 1.815

Note: Note: 1) The segment of developed countries includes ]apan ，North America and

Europe. Europe. The segment of developing countries includes China ，Brazi l， Thailand ，

India ，Af rica and Latin America. 2) 2) The figures for 2000-2005 are simple additions of the figures for Daiichi and Sankyo.

Source: Source: Daiichi Sankyo ，2006-20013 ，Annual Repor t. How How to Balance 山In teUectual Property Conflic t: aCa ぽ Study 01 ]apanese Pharmaceutical Comp 副 es in Emerging Countries -- 183

Table Table 4: Key Financial indicators of Eisai (in (in billions of Yen ，for the year ended March 31)

「ー lte rT隠 2000 2001 2002 2003 200< 2005 2006 2007 2008 20 国 2010 2011 2012 2013 s. 抱 5 in developed 299.5 356.9 42 '17 457.5 "90.3 521.1 56 J.1 650.4 706.5 753.4 771.6 733.6 610.6 530.1 markets Sales In emerglng 3.0 4.s 7.0 9.1 9.9 11. 9 17.6 23.7 27.8 28.3 31.6 35.3 37.4 43.6 markats

Net sales 302.5 361.7 431.7 466.6 500.2 533 601.3 6 74. 1 /34.3 78 1.7 803.2 168.9 646 ~13_7

0" ，，，司 ting 0)( 岡田副S 265.4 302.7 359 390.7 417.' 446.2 50~.6 56 1;1 .8 716.6 689.9 716 日 655.B 552.3 468.4 T rading surplus 37.1 59 72.7 75.9 83.1 86.8 95.7 105.3 17.7 9 1. 8 86.4 113.1 95.7 105.3

Ne t inc 日間 11.3 23.3 36.5 41 501 55.5 63.4 70.6 617.0 47.7 40.3 67.4 58.5 48.3 R&D ex 田 nses 46.7 49.6 55 59.7 69 18.3 83.2 108.3 225.4 156.1 179.1 145 125.1 120.04 Ba slc earning 四ヨ『 3864 78.68 123.5 14 1. 2 1721 193.4 221.9 247 凸 59.8 167.3 14 1. 6 236.5 205.3 169.4 common sha 開 (ven) Dlvlden 由田岡田f 21.5 23 29 32 36 56 90 120 130 140 150 150 150 150 CDm 間 n sha 冊〈咽nl ROE

Note: Note: The segment of developed countries includes ]apan ，America and Europe.

The segment of developing countries includes China ，lndia and the Middle-East

Source: Source: Eisai ，2000-2013 ，Annual Repor t.

Table Table 5: Key Financial indicators of Astellas (in (in billions of Yen ，for the year ended March 31)

It oms 2000 2001 2002 2003 2004 2005 2005 2007 2008 2009 2010 2011 2012 2013

Sales in develo 田 d 717.3 7491 8 H. 9 日779 日969 845.9 8596 8947 944.6 845.9 8832 902 9337 962.7 marlats

s 地al 『ehs atis ne me rghng 5.5 63 77 10.7 9.7 16.1 196 >57 278 27.2 30 331 357 429 Nu t sales 722.8 755 .4 822.7 。887 906.6 862 879.4 9206 912.6 9657 97 -4 9 9539 9694 1 ()()!).6

0"" 目 ting ex 四聖 nses 591.9 62 :.1 .9 601.6 "12 0.9 7-4 8.9 669.8 6 白6.3 730.1 696.6 715.3 788.4 H:H n 日37 日 851.7 R&D ex 匝 nses 100.4 1066 122.3 1293 1-4 3.7 127.6 1-47. 1 1679 13 -4 .5 159.1 195.6 2173 169 R 1820 Tradlng sur 凶us 1309 131.5 141.1 1678 157.7 192.2 193 1905 275.9 2504 1864 1192 131 5 153.9

Ne t inco 何時 80.' 60.8 81.3 88.5 101.5 59.5 103.7 1313 117-'" 171 1223 67.7 ?日 2 目2.9

8asic earning 回『 8.B 8.B 11.3 161 16 11 7 6.5 7.7 日 Cロm" 回 n sha 開{四 n)

。ividends 田岡同〈田ye 『n 1 B4 34407 34989 356.11 261 日4 146.49 169.38 180.4 CDm 町田 n share(ven) 日OE( ，叫 70 BO 110 120 125 125 125 13B

Sha 田岡田(yun) ~-，-~!Q 5 ，080 3 ，860 3.020 3.3 日5 3. 冊。 3.~OO 5，060 Note: Note: 1) The segment of developed countries includes ]apan. America. Canada. Latin America and Europe. The segment of developing countries includes China. Thailand. Thailand. Vietnam and Malaysia 2) 2) The figures for 2000-2005 are simple additions of the figures for Yamanouchi and Fujisawa

Source: Source: Astellas ，2006-2013 ，Annual Repor t. 184 184 一一一 BUSINESS REVIEW- 一一

Figure Figure 1 The cost structure of Takeda

100% 90% 80 % 70% 60% 50% 40% 30% 20% 10% 。% 2蜘 12001120021200312 似 12005 12揃 12 ∞712 制 1200912010 1201112012 12013 スOpe 凶噌P叫 tma 喝in 118 .57123 .4 7127 .98129 .70134 .20134 .31133 .23135 .13130 .78 11 9.92128 .66 125 泌 117 .5617.87

平 R初回pense ratio 18. 37 19. 32 19. 鈍 111.8 7111 例 112 ..5 9113 .99114 .81120 .06 129 叫 20.22120 .35118 .68 120. 82

災 Salead 同協同U 時制限階何回 122 .61123 .87125.59 127 .5212 お6.4 灯叫 司|ド 7μ2お5必 i伊2幻7.141泌26ι .純叫|ドω μ2泌.6.59 124 叫お.ιs 邸5/2 μ23ι 却9129 .4泊 オ3i抑34.7

巳De preciation and amorti 凶朗日tio 13.6213 .4 9 12 . 83 12.20125912 .7812 .371 2.21 12 . 31 17.681 7.8317.521 5必 pω .Salesc 田口制。. 146.83139 .85133.62128 .71124 .80124 .86 123 .27 121 .4 3120 .26118 .82119 .4 5122 .38128 .71128 .74 Source : Takeda. 2000-2013 .Annual Repor t.

Figure Figure 2 The cost structure of Daiichi Sankyo

100% 90 % 80 % 70 % 60 % 50 % 40 % 30% 20% 10% 。% 2鮒 12001 12∞21 2003 12捌 12005 12蹴 12007 12榔 /2制 12010 12011 12012 12013 父Operati 噌 P悶， fitm 時 in 118 .57123 .4 7127 .98129 .70 134.20134 .3 1133 .23 1お 13130 .78 119 .叫28 “125 .86 117 .5 617.87

平 R&D 割問問e 問。 18.3719 .32 19.98111 .8711l .94IU .59 113.99 114 ぉ 120 .06 12 9.4 5120 .22120 .35118 .68 120 .82

公 Sale administra 抑制児問団ω 122 .61123 .87 1ぉ59127 .52 126. 47 1ぉ 46127 .14 126.4 3126 .59 124 .14123 且5123 .8912 .9. 約 134 .7 6 .、 De preci 田 ion and amortizationratio 13.6213.49 12.8312 .20 1 2.5912 .781 2.3 7 1 2. 21 12. 3117 .6817 .8317 .5215 .6217 .80 .Sa 出 cost ratio 146 .83139 .85133 .62128 .71 124 .80124 .86123 .27 121 .4 3120 .26 118.82119 .45122 .38128 .71128 .74 Note: Note: The figures for 2000 - 2005 are simple additions of the figures for Daiichi and Sankyo Source :Daiichi Sankyo. 2006-2013 .Annual Report 一一 How 10 Balance the Inlellectual Propert y Conflic t: a Case Study 0/ Japanese Pharmaceutical ωmp 抑 es in Emerging Countries -- 185

Figure Figure 3 The cost structure of Eisai

100% 90 % 80% 70% 60% 50 % 40 % 30% 20 % 10 % 。%

H Operatir 習 profit margin tt tt R&D expense ratio

~ Sale administ 目別四割問問eratio

Depr 回副on a nd a mortiz '凶 on rat io 14.991 4.15 13.541 3.861 3.701 4.201 4.1613 .98 い鎚 16 .28 1 6ω 15 .66 1ι441 755 .5al"5 ∞民団tio 130 .28127 .2312351121.99119 .4 311 8. 48117.38116.21116 .1811951120 .0 112 1.8 2126 .76130 ヨ5

Source :Eisai .2000-2013 .Annual Report

Figure.4 Figure.4 The cost structure of Astellas

100% 90 % 80% 70% 60% 50% 40% 30% 20% 10% 。%

公Ope 悶討 f喝 profit margin

平 R&D 制限悶e ratio

N 5ale 抑制strative expense ratio 122.61123 .87125 .5 9127.52126 .4 7125 .将|幻 .14126.43126 .鈎 124 .14123.85123.89129 伺 134 .76

L 阪府民iati 加 andam 侃 i訓何冊目。 13.6213 .4 9 12 .8312.201 2.5 912.7812 .3712.211 2.3 11 7.6817 .8317 .5 21 5.6217 .80

.Sales .Sales c出 t日ω146.83139ι5133.62128.71124.8012 刈.86123 .27121 .43120 .26118 .82119 .4 5122 .38128 .71128 .74 Note: Note: The figures for 2000-2005 are simple additions of the figures for Yamanouchi and and Fujisawa. Source: Source: Astellas. 2006-2013 .Annual Report 186 186 一一一 BUSINESS REVIEW -一一

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